Insurance Is a Criminal’s Best Friend

Most residents of developed Western nations assume their justice systems are relatively infallible. Going through life without constantly worrying about whether people are capable of upholding a certain standard of objectivity and fairness is easier than the alternative.

But with human decisions come human biases, even in situations that demand objectivity. For example, crimes involving more victims can sometimes receive lesser punishments, an outcome known as the “identifiable victim effect.” With more victims, each one becomes less identifiable, and this elicits less sympathy for the victims and a corresponding punishment that’s less severe.

A new study (pdf) by a group of Tilburg University psychologists lays out another bias that can creep into evaluations of wrongdoing. In a series of six experiments the researchers found evidence for the “insured victim effect” — the tendency for perpetrators to be judged differently if the losses they cause are covered by insurance. In theory, a victim’s insurance status should be insignificant. If two people steal a car under identical circumstances, an objective justice system should punish them the same way regardless of whether the victim is reimbursed by an insurance company. Yet that’s not what the researchers found.

The initial set of experiments provided basic evidence for the insured victim effect by demonstrating that people recommend harsher punishments for the theft of uninsured items. A follow up experiment showed that the effect can occur even when the victim doesn’t suffer any harm. When participants were told a worker fell off a broken ladder because of a negligent manager, but that he suffered no harm, participants still recommended a harsher punishment for the manager when the worker was uninsured compared to when he had insurance.

Another follow up experiment pushed the boundaries of the insured victim effect even further. This time the two crimes were not the same. One group of participants read about somebody who stole an expensive and insured camera, while another group of participants read about somebody who stole a cheap and uninsured camera. Sure enough, participants recommended milder punishments for the person who stole the expensive and insured camera. Even when the crime was objectively worse, the presence of insurance caused people to be more lenient.

It’s worth noting that the insured-victim effect can be mitigated. Most of the experiments in the study included a condition in which participants evaluated an uninsured-victim scenario and an insured-victim scenario back-to-back. In these conditions people tended to rate the crimes the same regardless of the victim’s insurance status. The researchers concluded that when a comparison point is available, people manage to focus strictly on the nature of the crime. However, when there is no comparison, people tend to be swayed by legally irrelevant details conerning the crime’s consequences for the victim.

The problem, as the researchers point out, is that justice systems tend to not provide comparison points:

Legal systems are often rooted in the premise that punishments should be proportional to the harm caused. However, the harmfulness of an unethical act is evaluated differently when crimes are judged jointly or separately…

It is important to realize that, in real life situations, judges or jury members are usually in a separate rather than in a joint condition. Legal policy makers should be aware that people in separate evaluation are more easily swayed by legally irrelevant details (such as the insurance status of victims) when sentencing perpetrators. This conclusion is in particular pertinent for jury members who, unlike judges, have no experience and do not reason in a comparative fashion.

The easy solution is to prevent a victim’s insurance status from being mentioned in a courtroom, although that seems unlikely given the way lawyers tend to focus on every little detail. Perhaps it’s best to simply acknowledge another chink in the armor of objective justice, and be more vigilant when it comes to scrutinizing what judges and juries believe to be undeniably fair.

Update: 4/16

My esteemed father, a lawyer and infrequent SCOTUSblog contributor, passes along this link, which suggests that discussing insurance information is almost never permissible in court.
————————————————————————————————————————————————————-van de Calseyde, P.P., Keren, G., & Zeelenberg, M. (2013). The insured victim effect: When and why compensating harm decreases punishment recommendations Judgment and Decision Making

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2 Responses to Insurance Is a Criminal’s Best Friend

Your insight here is actually at the center of US bank policy at the moment. Technically insolvent To Big To Fail banks operate at a lower cost than their solvent but smaller peers because not only does our Fed/Treasury stand behind their every bad bet (but only for TBTF institutions) but our Justice Department has said any prosecution of the executives who annually certify the book (as required by Sarbanes Oxly) for the fraudulent character of their annual reports will forgone for the “health of the economy”.

Because we are all insuring banking losses through the Fed/Treasury, our powers that be have decided no punishment whatsoever is required for the largest frauds in history.